Correlation Between Capital Group and First Trust
Can any of the company-specific risk be diversified away by investing in both Capital Group and First Trust at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Capital Group and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Capital Group Short and First Trust High, you can compare the effects of market volatilities on Capital Group and First Trust and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Capital Group with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Group and First Trust.
Diversification Opportunities for Capital Group and First Trust
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Capital and First is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Capital Group Short and First Trust High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust High and Capital Group is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Capital Group Short are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust High has no effect on the direction of Capital Group i.e., Capital Group and First Trust go up and down completely randomly.
Pair Corralation between Capital Group and First Trust
Given the investment horizon of 90 days Capital Group Short is expected to generate 0.4 times more return on investment than First Trust. However, Capital Group Short is 2.53 times less risky than First Trust. It trades about 0.1 of its potential returns per unit of risk. First Trust High is currently generating about -0.05 per unit of risk. If you would invest 2,555 in Capital Group Short on August 29, 2024 and sell it today you would earn a total of 17.00 from holding Capital Group Short or generate 0.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Capital Group Short vs. First Trust High
Performance |
| Timeline |
| Capital Group Short |
| First Trust High |
Capital Group and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital Group and First Trust
The main advantage of trading using opposite Capital Group and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital Group position performs unexpectedly, First Trust can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in First Trust will offset losses from the drop in First Trust's long position.| Capital Group vs. Capital Group Multi Sector | Capital Group vs. Capital Group Municipal | Capital Group vs. Capital Group Global | Capital Group vs. Capital Group Dividend |
| First Trust vs. First Trust Low | First Trust vs. First Trust Emerging | First Trust vs. First Trust TCW | First Trust vs. First Trust Alternative |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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